4 Reasons to be Worried About US GDP Growth

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The GDP growth figure for the US in Q3 2012 was revised
from 2% to 2.7% (annualized). This is a significantly healthier
level of growth, yet it was a bit lower than 2.8% that was
expected.

The more worrying part isn’t in the minor headline
disappointment, but in the details. Here are 4 reasons to be
worried.

The US dollar is trading a bit higher on risk aversion, with
EUR/USD retreating from 1.30.

Lower consumption growth: The vast majority of
the US economy is in consumption, and this part was revised to
the downside: 1.4% instead of 2% originally reported.

Bigger Drop in Investment: The level of
investment is important for future growth. A drop of 2.2%
instead of 1.3% originally reported is worrying.

More Inventories: Building inventories is
certainly legitimate growth, but it means that inventories
could contract in the near future. So, having a lot of growth
in this component isn’t that positive.

Less trade: A more narrow trade deficit is
positive for the US and for the US dollar. Unfortunately, this
lower deficit isn’t only a result of exports, but of less
imports, and less global trade in general. Also here, the
components matter.

During Q4, the US probably enjoyed more growth, yet slow growth
once again. The data will likely be distorted due the effect of
Sandy. Hopefully, some rebuilding in the aftermath of Sandy +
intense Christmas shopping will make growth better.

EUR/USD rose towards 1.30 as positive statements were heard from
Washington regarding the fiscal cliff. However, it has a hard
time breaking higher.